Boeing plans on slowing down the production of the 737 Max by around 20% in the wake of two deadly crashes in the last five months. The American manufacturer also intends to establish a new internal safety committee.
The decision came after two crashes involving the Boeing 737 Max model. The Ethiopian Airlines Jet accident on March 10 remains the most recent case with 157 people killed onboard. It followed a previous crash involving a Lion Air plane in Indonesia last October that killed 189 people.
Boeing’s board will set up a committee to review how the company engineers and develops aircrafts. The American firm will also emphasise on improving the policies and procedures over the 737 Max model.
From mid-April, the production of their best-selling aircraft will drop from 52 to 42 the company said in a statement.
Boeing also faces logistical issues since it has already completed many orders. The accumulation of aircrafts turns out to be a massive issue in terms of storage and maintenance. Most of the finished planes have been stockpiling in Renton and other places around Seattle.
What did the Boeing statement mention?
“We now know that the recent Lion Air Flight 610 and Ethiopian Airlines Flight 302 accidents were caused by a chain of events, with a common chain link being erroneous activation of the aircraft’s MCAS function. We have the responsibility to eliminate this risk, and we know how to do it,” said in a latest statement Dennis Muilenberg, Boeing’s CEO.
Muilenberg also said that his company had gathered all its experts and engineers to solve and update the MCAS software.
“As we continue to work through these steps, we’re adjusting the 737 production system temporarily to accommodate the pause in Max deliveries, allowing us to prioritise additional resources to focus on software certification and returning the Max to flight,” he added.
Despite the temporary policy embraced by Boeing, Muilenberg said that there would not be any redundancy amongst staff.
Why are all the Boeing 737 Max grounded?
Preliminary probes into the two crashes reveal that both aircrafts crashed after anti-stall software activated due to wrong flight information. The anti-stall software is a feature only present on the Boeing 737 Max.
The software, named MCAS, was an addition to the airplane to compensate its larger and more furl-efficient engines. Consequently, this technical change modified the aerodynamics of the plane and could lead to potential stalls.
After the Lion Air crash, Boeing dispatched engineers to update the software. However, both the company and aviation authorities deemed the plane safe to fly. Moreover, many pilots had not been informed of the new feature on the plane before the crash in Indonesia. Boeing explained that pilots could handle a malfunction during the flight by following instructions issued by the company.
That assertion, backed by the Federal Aviation Administration, came under scrutiny after a first report by Ethiopian authorities showed that the pilots had respected the instructions before the accident.
Eventually, regulators opted to ground all the airplanes after the second crash. Boeing engineers are now working again on the MCAS software.
What could be the economic impact on Boeing?
With hundreds of Boeing 737 Max grounded worldwide and hundreds of orders frozen or delayed, the American giant can not exactly measure the economic impact on the company.
Introduced in 2011 to compete with its European rival, Airbus, the Boeing 737 Max became the best-selling aircraft. Each model sells for around $100 million.
The potential bill will grow drastically if the situation lasts during the summer. Boeing had been planning on speeding up the production again in June to manufacture 57 aircrafts per month.
In addition to a potential profit loss, Boeing’s current turmoil could heavily affect the American economy.
“If the issues are not resolved in a timely manner and production of the 737 Max needs to be halted for a spell, it would take about 0.15% off the level of GDP, or about 0.6%-point off the quarterly annualized growth rate of GDP in the quarter in which production is stopped,” said Michael Feroli, JP Morgan chief economist.
As a comparison, the Congressional Budget Office estimated that the government shutdown that ended on January 25, the longest in the US history, decreased about 0.4 percentage points off the first-quarter GDP reading.
As a consequence, Indonesia’s flagship airline is moving to cancel a $5 billion order for 49 jets. New purchases of Boeing 737 Max account for 80% of Boeing order’s book.
“This year sales of the 737 were projected to total about $35 billion, with about 90% accounted for by the Max model, or about one-quarter of total domestic aircraft production, according to our equity analysts,” added Feroli.